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FDI declined by 11% in Bangladesh amid global pandemic

Bangladesh received 11% less Foreign Direct Investment (FDI) in 2020 amid a global decline, the United Nations Conference on Trade and Development (UNCTAD) said recently.

In 2020, Bangladesh received $2.56 billion, which was $2.87 billion in 2019.

In addition, UNCTAD said in its statement that Bangladesh is a “low investment commitment” nation.

FDI-declined1-11%-Bangladesh
Figure: In 2020, Bangladesh received $2.56 billion, which was $2.87 billion in 2019. Courtesy: Collected

According to the World Investment Report (WIR) 2021 of UNCTAD, FDI also downed in other South Asian economies that depend on the readymade garment (RMG) exporting.

Which depicted in Bangladesh’s recent RMG exports. Since April 2020, the Bangladesh garment manufacturers and exporters association (BGMEA) projected that more than $3 billion worth of exports had been lost or suspended.

The WIR 2021 also stated that FDI inflows in Bangladesh are shifting away from big non-renewable energy and finance projects towards fintech, the pharmaceutical industry, liquefied natural gas plants and agribusiness, which the government is actively encouraging.

The report further said, the prospects of FDI in the least developed countries (LDCs) remain cowed in the near future and inflows are expected to remain inactive over the next few years.

Global FDI state

Globally FDI deteriorated by 35% to $998.91 billion in the last year from $1,530.28 billion in 2019 due to the COVID-19 pandemic.

Yet, FDI flows to developing countries in Asia improved by 4% to $535 billion in 2020, showing resilience amid global FDI reduction.

FDI in South Asia grew by 20% to $71 billion, driven mainly by a 27% rise in FDI in India to $64 billion.

In India, robust investment in ICT and construction bolstered FDI inflows. Cross-border M&As surged 83% to $27 billion, with major deals involving ICT, health, infrastructure, and energy.

According to James Zhan, UNCTAD’s director of investment and enterprise, FDI to and from the developing Asia region remained resilient in 2020 despite the pandemic, recording FDI growth, accounting for more than half of global inward and outward FDI flows.

In the meantime, South-East Asia logged a 25% FDI reduction to $136 billion.

Lockdown measures, successive waves of COVID-19 infection, supply chain disruption, falling corporate earnings, economic uncertainties, and delayed investment plans were key reasons for the contraction.

In Thailand, FDI sank to -$6 billion, driven by the divestment of Tesco (United Kingdom) to a Thai investor group for $10 billion. In Malaysia, FDI fell by 55% to $3 billion. FDI in Cambodia was flat at $3.6 billion thanks to inflows in finance. In Myanmar, FDI dropped 34% to $1.8 billion.

According to UNCTAD, the immediate challenge is to minimize the number of “lost” years in terms of progress toward SDG goals.

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